Correlation Between Ocean Sun and River Tech

Can any of the company-specific risk be diversified away by investing in both Ocean Sun and River Tech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ocean Sun and River Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocean Sun As and River Tech plc, you can compare the effects of market volatilities on Ocean Sun and River Tech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ocean Sun with a short position of River Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Sun and River Tech.

Diversification Opportunities for Ocean Sun and River Tech

0.27

Correlation Coefficient

Ocean Sun  River Tech

Modest diversification

The 3 months correlation between Ocean and River is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Sun As and River Tech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River Tech plc and Ocean Sun is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ocean Sun As are associated (or correlated) with River Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River Tech plc has no effect on the direction of Ocean Sun i.e., Ocean Sun and River Tech go up and down completely randomly.

Pair Corralation between Ocean Sun and River Tech

Assuming the 90 days trading horizon Ocean Sun As is expected to generate 0.97 times more return on investment than River Tech. However, Ocean Sun As is 1.04 times less risky than River Tech. It trades about 0.0 of its potential returns per unit of risk. River Tech plc is currently generating about -0.04 per unit of risk. If you would invest  181.00  in Ocean Sun As on September 12, 2024 and sell it today you would lose (18.00) from holding Ocean Sun As or give up 9.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ocean Sun As  vs.  River Tech plc

Ocean Sun As

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Sun As has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Ocean Sun is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

River Tech plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days River Tech plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ocean Sun and River Tech

The main advantage of trading using opposite Ocean Sun and River Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Sun position performs unexpectedly, River Tech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in River Tech will offset losses from the drop in River Tech's long position.

The idea behind Ocean Sun As and River Tech plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.